Alan Greenspan, the sage, knighted by the Queen, once famously remarked that it’s very difficult to see a “bubble” until after the fact.
A “bubble”, in economics and market-talk, is when prices rise to irrational levels. And people keep buying. Eventually there is a “blow off top”, a final and dramatic thrust upward – which is always shocking in retrospect – the bubble bursts, prices collapse, and there is a return to the mean. Or something like that.
One of the most famous economic bubbles involved tulips in the 1600’s.
Economics as a discipline has endeavored in the 20th century to become more scientific, even mathematical. Nobel prizes in economics have been awarded to mathematicians. Yet at bottom it’s not a good fit. Economics is more properly described as a social science. Formulas work – until they don’t. “Bubbles” are perhaps the most significant economic phenomena, but mathematical models don’t predict them. And even the most knowledgeable people often can’t see them, even when they’re standing right in the middle of them.
Bubbles are something of a paradox. It is precisely when the price has gone sky high, when it has reached an unimaginable zenith – usually, a measure of strength and power – that its fundamental weakness suddenly appears and it is destroyed by its own excess.
This is not confined to economic phenomena: in Holland in the 1600’s you had tulips; in 21st century Texas you have Sharon Keller as the Chief Judge of the Court of Criminal Appeals.
Sharon Keller sits at the top of a different kind of bubble, a nationwide bubble in “tough on crime” politics that has been like a slow motion frenzy of criminal prosecutions, convictions and incarcerations. It’s been going on in earnest for almost 30 years.
Sooner or later – one hopes sooner – a sharp object will come along and pop this bubble, too. Something that can’t go on, won’t.